Updates from the USPTO and OED: Patent Issues (Part IV): Referrals and Reciprocal Discipline7/25/2022
 Part IV of this series will address the USPTO Rules of Professional Conduct related to referrals and reciprocal discipline.
Parts I, II and III of this series have focused on updates at the USPTO and OED relating to issues that arise when the practitioner is being paid by someone other than the client. As a quick recap, in recent years the USPTO and OED have been stepping up enforcement of the USPTO’s Rules of Professional Conduct, particularly with regard to rules involving interactions between practitioners, clients and third parties. To assist in highlighting these rules I (as well as the OED) have focused on interactions involving Invention Assistance Companies (IAC’s), particularly where the IAC directly pays the practitioner on behalf of an inventor/applicant. If you missed Part I it can be read here, Part II can be read here, and Part II can be read here. Referral Agreements As discussed in previous entries of this series, the United States Patent and Trademark Office Rules of Professional Conduct (USPTO RPC) are generally stricter that most states bar ethical rules, as well as the ABA model rules. Generally, attorneys in the U.S. are not permitted to share referral fees with non-attorneys. This rule is clearly part of the USPTO RPC and cannot be subverted. However, U.S. attorneys under certain circumstances, in accordance with at least ABA Rules 1.5 and 1.7, can make reasonable payments for referrals to practicing attorneys when certain ethical and monetary considerations are followed. The USPTO Rules of Professional Conduct, with regard to referrals to or from practitioners are less clear than the ABA rules, partially because the USPTO has chosen not to define the conditions under which practitioners can have agreements with other practitioners and non-practitioner professionals related to referrals. Specifically, Rule 702 states: § 11.702 Advertising. (a) Subject to the requirements of §§ 11.701 and 11.703, a practitioner may advertise services through written, recorded or electronic communication, including public media. (b) A practitioner shall not give anything of value to a person for recommending the practitioner’s services except that a practitioner may: (1) Pay the reasonable costs of advertisements or communications permitted by this section; (2) [Reserved] (3) Pay for a law practice in accordance with § 11.117; and (4) Refer clients to another practitioner or a non-practitioner professional pursuant to an agreement not otherwise prohibited under the USPTO Rules of Professional Conduct that provides for the other person to refer clients or customers to the practitioner, if: (i) The reciprocal referral agreement is not exclusive, and (ii) The client is informed of the existence and nature of the agreement. (c) Any communication made pursuant to this section shall include the name and office address of at least one practitioner or law firm responsible for its content. As stated in Rule 702 (b)(4) “A practitioner shall not give anything of value to a person for recommending the practitioner’s services except that a practitioner may…” “Refer clients to another practitioner or a non-practitioner professional pursuant to an agreement not otherwise prohibited under the USPTO Rules of Professional Conduct that provides for the other person to refer clients or customers to the practitioner, if: (i) The reciprocal referral agreement is not exclusive, and (ii) The client is informed of the existence and nature of the agreement” Therefore, it is clear that practitioners and non-practitioner professionals (non-U.S. registered U.S. attorneys) may have non-exclusive agreements in which they refer work to each other, as long as the agreement is “not otherwise prohibited under the USPTO [PRC]”, and understood and consented to by the client. What is not clear is whether the agreement can provide any monetary compensation between practitioners and non-practitioner professionals. In view of the detailed requirements laid down by the ABA and other state bar ethics rules (at least Rules 1.5 and 1.7), and the lack of such detail in the USPTO RPC, it appears that monetary payments cannot be a part of any referral agreement for USPTO practitioners. Reciprocal Discipline The OED requires that any disciplinary actions taken against registered practitioners must be disclosed in every jurisdiction in which the practitioner is licensed. This includes actions taken by the OED or actions taken by your state or federal bar. This rule applies equally to trademark practitioners whether or not they are registered USPTO patent practitioners. Therefore, any attorney that “dabbles” in trademark practice needs to be cognizant of their ethical and practical duties with regard to reciprocal discipline at the USPTO. Rule 24 states as follows: § 11.24 Reciprocal discipline. Notice to the OED Director. Within 30 days of being publicly censured, publicly reprimanded, subjected to probation, disbarred or suspended by another jurisdiction, or disciplinary disqualified from participating in or appearing before any Federal program or agency, a practitioner subject to the disciplinary jurisdiction of the Office shall notify the OED Director in writing of the same. Rule 24 read in conjunction with Rule 58 informs practitioners that not only are all USPTO/OED disciplinary actions required to be provided to your state and local bar, but that all state and local disciplinary actions are required to be provided to the USPTO. Specifically, Rule 58 (c)(2) states: (c) Thirty-day requirements. Within 30 days after the date of the order of exclusion, suspension, or transfer to disability inactive status, an excluded or suspended practitioner, or practitioner transferred to disability inactive status, shall: …… (2) Provide written notice of the order of exclusion, suspension, or transfer to disability inactive status to all State and Federal jurisdictions and administrative agencies to which the practitioner is admitted to practice; Further, the OED actively monitors disciplinary actions in other jurisdictions and sanctions can be brought against practitioners if they do not affirmatively bring all disciplinary action to the attention of the OED. As discussed above, this is true for registered patent practitioners and any attorney that practices trademark law before the USPTO. The Final Order in In Re Djiba (D2022-12) discuses a Texas personal injury attorney that was reprimanded by the OED for failure to self-report a disciplinary action (non-IP related) brought by the Texas bar. Mr. Djiba, while not affirmatively holding himself out as a trademark professional was involved in trademark application filings and therefore was under the jurisdiction of OED. While the OED originally sought stronger sanction (suspension), it ultimately agreed to a reprimand in a settlement agreement. See In Re Djiba D2022-12 (April 7 2022) (viewable at the OED reading room via foidocuments.uspto.gov, search “Djiba”). The Djiba case is a warning to all practitioners, patent and otherwise, to be aware of the USPTO Rules of Professional Practice and ensure that all disciplinary actions are reported from the OED to their state and federal bars, and to report all state and federal bar disciplinary actions to the USPTO. These rules apply equally to IP and non-IP related conduct. If you have made it through all four parts of this series on USPTO practice and ethical obligations I thank you for your efforts and fortitude. If there is one takeaway you should not forget, it is to know who your client is, and that your ethical duties and obligations are always to your client. If you have any questions about patents, trademarks, or professional responsibility, please contact me at [email protected] or visit my website at www.chiaraiplaw.com Updates from the USPTO and OED: Patent Issues (Part III): Communication and Foreign Agents6/30/2022
 Part III of this series will address the USPTO Rules of Professional Conduct related to communication, and discuss how third-party interactions with Invention Assistance Companies (“IAC”) are relevant to relationships with foreign agents/liaisons.
Parts I and II of this series have focused on updates at the USPTO and OED relating to issues that arise when the practitioner is being paid by someone other than the client. As a quick recap, in recent years the USPTO and OED have been stepping up enforcement of the USPTO’s Rules of Professional Conduct, particularly with regard to rules involving interactions between practitioners, clients and third parties. To assist in highlighting these rules I (as well as the OED) have focused on interactions involving IAC’s, particularly where the IAC directly pays the practitioner on behalf of an inventor/applicant. If you missed Part I it can be read here, and Part II can be read here. One of the critical rules of practitioner ethical responsibility is to always provide informed, prompt, and understandable communications to the client. As discussed in Parts I and II of this series, the lapse of this ethical responsibility in In Re Mikhailova (D2017-18) was not only a problem in and of itself, it also exacerbated other existing problems (for a reminder on the facts presented in In Re Mikhailova, see Part I here) USPTO RPC § 11.104 (Communication), recites as follows: (a) A practitioner shall: (1) Promptly inform the client of any decision or circumstance with respect to which the client's informed consent is required by the USPTO Rules of Professional Conduct; (2) Reasonably consult with the client about the means by which the client's objectives are to be accomplished; (3) Keep the client reasonably informed about the status of the matter; (4) Promptly comply with reasonable requests for information from the client; and (5) Consult with the client about any relevant limitation on the practitioner's conduct when the practitioner knows that the client expects assistance not permitted by the USPTO Rules of Professional Conduct or other law. (b) A practitioner shall explain a matter to the extent reasonably necessary to permit the client to make informed decisions regarding the representation. As discussed previously, because Dr. Mikhailova was following instructions from WPM (the IAC) to not speak to or have any direct contact with her clients, she was unable to: keep her clients informed about actions that needed to be taken on their cases; discuss what actions should or should not be taken; discuss what types of patents should be filed (utility v. design); directly receive requests from the clients for assistance. Most importantly Dr. Mikhailova never had discussions with the clients to discuss what the clients ultimately wanted out of the representation. Without consistent, direct, and informed communications between the client and the practitioner the relationship is doomed to failure. Practitioners should be keenly aware of their duty to provide prompt informed communications to their client on all USPTO matters. Relying on an intermediary, while not per se wrong, can quickly become problematic for the practitioner’s ethical responsibilities, particularly where the intermediary has a commercial interest in the representation. A silver lining to this story was that WPM was ultimately shut down by the Federal Trade Commission to protect the public. Factual allegations and the FTC’s extensive list of violations are detailed in the preliminary injunction, which can be found here. Hopefully most practitioner will not find themselves in the position of the agents or attorneys that have fallen prey to companies like WPM, nevertheless the USPTO rules and ethical obligations should be considered in every client relationship. Particularly when working with foreign counsel on U.S. filed foreign originated cases. Notably towards the end of In Re Mikhailova the OED stated: Regarding communications with clients, the USPTO Director is aware that a practitioner may communicate with someone other than the client in cases where there is a bona fide corporate liaison or a foreign agent who conveys instructions to the practitioner. In such an arrangement, the practitioner may rely upon instructions of the corporate liaison or the foreign agent as to the action to be taken in a proceeding before the Office so long as the practitioner is aware that the client has consented to have instructions conveyed through the liaison or agent. Accordingly, nothing in this notice should be construed as contradictory to the discussion entitled “Practitioner's Responsibility to Avoid Prejudice to the Rights of a Client/Patent Applicant” set forth in Official Gazette Notice published at 1086 OG 457 (Jan. 12,1988) or the discussion entitled “Responsibilities of Practitioners Representing and Clients in Proceeding Before The Patent and Trademark Office” set forth in Official Gazette Consolidated Notice published at 1421 OG 2690 (Dec. 29, 2015). Nevertheless, this notice is to be read as providing additional, specific guidance to practitioners under circumstances where a non-practitioner third party refers inventors to registered practitioners to provide the patent legal services purchased by inventors from the third party. (See In Re Mikhailova, at 10-11 (emphasis added)). While the OED has not revoked any of the 1988 or 2015 guidance providing instructions to practitioners with regard to interactions with third party non-practitioners, it did state that the guidance in In Re Mikhailova should be read “as providing additional, specific guidance to practitioners under circumstances where a non-practitioner third party refers inventors to registered practitioners to provide the patent legal services purchased by inventors from the third party.” The 1988 guidance provides language that can be inserted in a declaration, oath or power of attorney to allow the U.S. practitioner to accept instructions from a foreign agent or liaison, the language is provided below: The undersigned hereby authorizes the U.S. attorney or agent named herein to accept and follow instructions from as to any action to be taken in the Patent and Trademark Office regarding this application without direct communication between the U.S. attorney or agent and the undersigned. In the event of a change in the persons from whom instructions may be taken, the U.S. attorney or agent named herein will be so notified by the undersigned. It has been common in U.S. practice to rely on language similar to the above. Often, this language, and the oath/declaration or power of attorney is the only written agreement between the practitioner and the foreign client, and all other agreements are directly with the foreign agent/liaison. The instructions from In Re Mikhailova suggest that while the above language may be helpful towards defining the client-practitioner relationship, it likely is not sufficient. With the above lessons in mind the practitioner should always be aware that the client is the inventor or applicant, not the foreign agent/liaison. The practitioner should have an engagement letter (or at least some form of written agreement) directly with the inventor/applicant that spells out the duties and obligations the practitioner would have with a U.S. client (who the client is, scope of work, fees and costs, termination of representation, etc..). If the foreign agent/liaison is going to be relaying instructions to U.S. counsel this should be explicitly stated in the engagement letter. Additionally, while the foreign agent/liaison may charge the client for their services, it must be a separate charge and not part of, or a percentage of the U.S. legal fees, otherwise this would be sharing fees with a non-practitioner. As with the IAC, the foreign agent/liaison can directly pay the U.S. practitioner, but this arrangement must be detailed in the engagement letter and there can be no fee-splitting (see Part II for a more detailed explanation on what constitutes fee-splitting). Care and attention should be paid to all third-party relationships be they with Invention Assistance Companies, foreign associate, foreign liaisons, or even domestic referrals (more on this in Part IV). Your client is always the inventor/applicant and you should be aware of your ethical duties and obligations to the client. Part IV of this series will address additional aspects of USPTO Rules of Professional Conduct related to referrals and reciprocal discipline. If you have any questions about patents, trademarks, or professional responsibility, please contact me at [email protected] or visit my website at www.chiaraiplaw.com  Part II of my series focusing on updates at the USPTO and OED will discuss the USPTO Rules of Professional Conduct (“USPTO RPC”) that relate to conflict of interest when the practitioner is being paid by someone other than the client. As a quick recap, in recent years the USPTO and OED have been stepping up enforcement of the USPTO’s Rules of Professional Conduct, particularly with regard to rules involving interactions between practitioners, clients and third parties. To assist in highlighting these rules I (as well as the OED) have focused on interactions involving Invention Assistance Companies (“IAC”), particularly where the IAC directly pays the practitioner on behalf of an inventor/applicant. If you missed Part I it can be read here.
As discussed in Part I, the non-practitioner rules (37 C.F.R. § 11.504(a)&(b)) require IAC’s to either refer clients to patent attorneys or patent agents (“practitioners”), and/or to contract with the practitioner on behalf of their clients. It is not per se illegal or unethical for third parties to pay fees for inventor/applicants, however, there are specific rules that must be followed for the relationship to comply with the USPTO RPC. Conflict of Interest Rules for Payment by a Third Party According to 37 C.F.R. § 11.108(f): A practitioner shall not accept compensation for representing a client from one other than the client unless: (1) The client gives informed consent; (2) There is no interference with the practitioner’s independence of professional judgment or with the client-practitioner relationship; and (3) Information relating to representation of a client is protected as required by § 11.106. [confidentiality] Possibly the most important question a practitioner must answer when determining the ethical obligations associated with the conflict of interest rules is “who is the client.” To be clear, in the third-party relationship with the IAC, the client is always the inventor/applicant. The IAC is not the client. The practitioner’s ethical obligations of competence, communications, loyalty, independent professional judgment, and confidentiality are to the inventor/applicant, not the IAC. The “informed consent” (37 C.F.R. § 11.108(f)(1)) should be in writing and signed by the client and the patent practitioner. Remember, that the client will always be the inventor and not the IAC. Regardless of the existence of an agreement between the practitioner and the IAC there should be a separate written agreement (preferably an engagement letter) directly between the inventor and practitioner setting forth who is the client, what the scope of the representation will be, how much the practitioner will charge for any services, when the representation ends (i.e., after filing, after prosecution, after payment of maintenance fees, etc.… ), and how the practitioner will be paid, especially if the payment will come from the IAC. While 37 C.F.R. § 11.108(f)(1) does not explicitly state the need to detail and breakdown the fees and services, the Federal Circuit in Bender v. Dudas 490 F.3d 1361 (Fed. Cir. 2007) has made it explicit that informed consent obligates a patent practitioner to provide these details in writing to the client. The next portion of the third-party payee conflict of interest rule, 37 C.F.R. § 11.108(f)(2), requires that the acceptance of the payment does not cause “interference with the practitioner’s independence of professional judgment or with the client-practitioner relationship.” This rule does not create any new obligations, but reminds the practitioner of their duty to the client. An example of how this rule can be violated was demonstrated in In Re Mikhailova (D2017-18) when the Invention Assistance Company instructed the patent practitioner to file design patents for the inventors (for details on In Re Mikhailova see Part I). Whether the client wants or needs a design patent, in contrast to a utility patent or no patent at all, is a decision that must be made by the client based on information and discussions with the patent practitioner. The decision cannot be left to the IAC, and for the practitioner to not understand this distinction and rely on the instructions from the IAC is a violation 37 C.F.R. § 11.108(f)(2). As discussed in Part I of this series, the commercial interests of the IAC (e.g., cheap, fast and profitable) should not be a factor in the practitioner’s representation of the client. Delegating decisions related to the representation of the client to the IAC, intentionally or unintentionally, creates a conflict of interest. An additional concern arises when the practitioner is receiving numerous referrals from a single IAC or third party. In this situation, the practitioner must additionally provide written information detailing the extent of the relationship with the IAC (or third party), fully explain the relationship to the client, and allow the client to make an informed decision before agreeing to be represented. Practitioners should always be conscious that the practitioner’s relationship with a third party (referring multiple clients) could eventually result in an unwaivable conflict. The above scenario, which actually exists in many factual recitations in OED opinions, is how practitioners (often solo practitioners with a poor understanding of the USPTO RPC) run afoul of the Conflict of Interest Rule. They do not understand who is the client and to whom they owe their ethical obligations. If the IAC is sending a practitioner 20-30 patent applications a month and telling the practitioner to file them “as is” the practitioner is almost certainly violating their ethical duties to the inventor. Practitioners erroneously view this business model as one in which the IAC is the “boss” who is providing large amounts of work, and the only necessity is to keep each project separated by docket number. Unfortunately, this is a gross violation of USPTO Rules of Professional Conduct. Each client must be treated separately, with an independent conflict of interest search, a separate engagement letter, direct communication between the practitioner and the client to determine the needs and goals of the client, and all communications, including the engagement letter must be maintained confidential. Confidentially is the last portion of the third-party payee conflict rule (37 C.F.R. § 11.108(f)(3)). Practitioners have an ethical duty not to affirmatively disclose information related to the representation of the client (37 C.F.R. § 11.106). The fact that the client is also engaged with a third party in the filing of a patent application does not revoke the need or the obligation of confidentiality. The client may allow the third party to have access to certain communications between the client and the practitioners, however, this must be done with informed consent and in writing. Further, the practitioner must make it clear to the client that granting a third-party access to the practitioner-client communication may (and probably will) destroy confidentially. Assuming all of the obligations and duties required by Rule 108(f) have been fulfilled, the practitioner must still understand the distinction between fee-splitting and payment by a third party. No legal fees may be split between a practitioner and any non-practitioner. The Invention Assistance Company can receive fees for their services from the client, but the fees paid by the client to the IAC cannot be one lump sum for the IAC and the practitioner that is later divided by the IAC. The fees paid to the IAC must have explicit details about what portions are going to the IAC for its non-legal services, what portions are going to the practitioner for their legal services, and what portions are going to the USPTO for filing fees. 100% of the legal fees must go to the practitioner. The IAC cannot take a percentage or a portion of the legal fees as payment for arranging the relationship. Moreover, if the payments made to the IAC occur before the practitioner is engaged (as often happens), the practitioner has an obligation to obtain copies of those documents to ensure that all legal and non-legal services have been separated. Lack of knowledge on the practitioner’s part with regard to fee-splitting (such as where payments were made to the IAC before the practitioner’s engagement) is not a defense. Part III of this series will address additional aspects of USPTO Rules of Professional Conduct related to communication, referrals, and reciprocal discipline. Additionally, I will discuss how the third-party interactions with IAC’s are relevant to relationships with foreign associates and particularly foreign originated applications. If you have any questions about patents, trademarks, and practitioner professional responsibility, please contact me at [email protected] or visit my website at www.chiaraiplaw.com  In recent years the United States Patent and Trademark Office (“USPTO”) through their ethics enforcement arm, the Office of Enrollment and Discipline ("OED") has been stepping up enforcement of the USPTO’s Rules of Professional Conduct. As many patent and trademark practitioners are aware the USPTO has their own Rules of Professional Conduct codified at 37 C.F.R. §11 et al. While the USPTO Rules of Professional Conduct (“USPTO RPC”) generally track the American Bar Association’s (“ABA”) Model Rules, the USPTO RPC are notoriously stricter and often more diligently enforced. Specific rules that have received heighten attention in recent years, at least on the patent side of the OED enforcement docket, pertain to: fee-splitting; establishment of practice with non-practitioners; conflict of interest; and client communications.
One major reason for the focus on these rules has been the increased prevalence of Invention Assistance Companies (“IAC’s”). The history of Invention Assistance Companies (and Invention Promotion Companies) is replete with scams, false promises, stolen money and unhappy customers. To be fair, not all IAC’s are created equal, and some have relatively good reputations. However, in recent years there has been a substantial increase in the public's willingness to engage in all manner of commerce, including obtaining legal or quasi-legal assistance, over the internet. This has resulted in a substantial increase in the size and number of Invention Assistance Companies as well as the associated complaints at the Federal Trade Commission (“FTC”), local regulatory authorities, and/or the USPTO. The USPTO sees it as their duty to protect the patent system and the inventing public, be they trillion-dollar companies or a first-time solo inventor. Unfortunately, the authority of the USPTO to regulate and/or sanction individuals is limited to registered U.S. patent attorneys, patent agents and U.S. counsel that file trademark applications. In an attempt to ensure that customers of Invention Assistance Companies are being treated fairly and obtaining proper assistance with patent filings the USPTO (often through the OED) have sought to enforce a few key sections of the USPTO RPC, particularly rules associated with third parties (i.e., involvement of third parties outside of the practitioner-client relationship). Invention Assistance Companies such as Invent Help, World Patent Marketing, Invention Home, Invention Partner and The Inventor’s Platform (some of which no longer exist) generally rely on non-attorney models that offers a combination of assistance with patent filing, developing prototypes, marketing, and general business start-up. Prior legislation aimed at “Invention Promotion Companies” temporarily slowed some of the activities of these types of organization in the 1990’s, but the limited scope of the legislation ultimately led to easy work arounds, and a revival of Invention Assistance Companies. While there are many questions about what if any of the services provided by Invention Assistance Companies fall under the category of the practice of law (e.g., providing patent landscapes, opinions on prior art searches, and/or patentability opinions) patent filing for another in the U.S. must be done by a registered patent attorney or patent agent. Therefore, under the current iteration of the IAC model when they seek to assist their clients with actual patent filing the IAC must engage licensed patent attorneys or patent agents. The engagement can be accomplished either via referral or direct contract with the practitioner on behalf of the inventor/application. It can be done lawfully and in compliance with the USPTO Rules of Professional, if it is done correctly, however, this requires a detailed understanding of the RPC, which most practitioners and very few IAC’s possess. The following discussion will analyze a few of the key rules and how patent practitioners can run afoul of the Rules of Professional Conduct when engaging with a third party on behalf of the client, be it an Invention Assistance Company or Foreign Counsel (more on this in Part II). Professional Independence of a Practitioner 37 C.F.R. § 11.504(a) states “A practitioner or law firm shall not share legal fees with a non-practitioner.” 37 C.F.R. § 11.504(b) states “A practitioner shall not form a partnership with a non-practitioner if any of the activities of the partnership consist of the practice of law.” These rule limits the ability of Invention Assistance Companies from partnering with patent practitioners and making the filing of patent applications a part of the IAC’s direct service. The focus behind these rules is to maintain the professional independence of the practitioner. A concern (one of many) is that the non-practitioner will be directing the actions of the practitioner based on what is in the commercial interest of the business, and not what is best for the client. As a side-note, patent attorneys and patent agents can partner together under the USPTO RPC because patent agents are considered practitioners under the USPTO rules. 37 C.F.R. § 11.1 defines practitioner as “[a]n attorney or agent registered to practice before the Office in patent matters.” Further, patent agents can operate businesses offering legal service solely before the USPTO even if they are not licensed to practice law in their state of residence. Sperry v. Florida, 373 U.S. 379 (1963) exempts patent agents from being charged with unlawfully engaging in the practice of law as long as the services offered by the patent agent are limited to work done before the USPTO. Instances of registered patent attorneys and patent agents flouting the non-practitioner partnership/fee splitting rules (often without knowledge and/or understanding of the rules) have become increasingly common in the attempts to create internet-based businesses that provide patent filing services. While the intention may be to reduce cost and increase convenience for patent filers, a noble goal, the hard fact is that filing patent applications is the practice of law and in at least 48/50 states (Arizona and Utah being the current exceptions) partnership/ownership of businesses conducting the practice of law, is limited to attorneys, law firms and patent agents. Specifically, in my home state, the New York State Bar citing Model ABA Rule 5.4 has stated that non-attorneys cannot invest in New York law firms. See December 7, 2021 Opinion 1234 from Committee on Professional Ethics, New York State Bar Association. In Re Mikhailova D2017-18, an OED decision discussed below, provides an explanation of how the independent judgement of a practitioner can be usurped when RPC 504 is violated. This case involves the Invention Assistance Company World Patent Marketing (“WPM”). Initially WPM hired Dr. Mikhailova as a patent agent to provide patent filings for WPM customers. Later in their relationship, WPM referred clients to Dr. Mikhailova. Throughout the relationship, WPM instructed Dr. Mikhailova on what types of patents to file for each client, and further not to communicate directly with the clients. The arrangement was in violations of over a dozen USPTO RPC. In particular, Dr. Mikhailova was in violation of RPC 504(a) and/or (b) because she was either sharing legal fees with WPM a non-practitioner and/or had effectively formed a de facto partnership with WPM. Additionally, Dr. Mikhailova was assisting WPM in committing the unauthorized practice of law under 37 C.F.R. § 11.505), she had violated her duty of communication to the client under at least 37 C.F.R. § 11.104(a) and (b), and was not in compliance with several sections of 37 C.F.R. § 11.108 related to conflict of interest. Dr. Mikhailova’s case provides a pertinent example of what can happen when the practitioner’s professional judgement is delegated to a third-party non-practitioner. WPM was instructing Dr. Mikhailova to file design patent applications for many of their customers. For WPM the quickest and easiest patent filing is for a design patent. Design patent applications require less work by the patent practitioner, can generally be obtained quicker and faster, and allow WPM to say they filed for a “patent” (and potentially charge the same fees for a design patent as for a utility patent, which often costs 3-10 times as much). However, a design patent may or may not be in the best interests of the client. The patent practitioners ethical and legal duty is to the client, and to fulfill its duty to the client the practitioner must communicate and discuss what is best and most appropriate for the client based on his/her specific circumstances. What is best for the commercial interest of the third party are irrelevant and should not be a factor in the decision of what, if anything, should be filed. The business relationship Dr. Mikhailova had entered into with WPM led to a situation where she allowed herself to take directions from a third party without first considering the needs of her actual client, the inventor/applicant. While the above factual situation runs afoul of multiple Rules of Professional Conduct (which will be discussed in later posts on this topic), the partnering and/or fee-splitting with the non-practitioner, was the first step down the rabbit hole of ethical violations. The Dr. Mikhailova Order can be viewed at the OED Reading Room at: https://foiadocuments.uspto.gov/oed/ (enter “Mikhailova” or “D2017-18” in the search bar). Part II and III of this series will address additional aspects of USPTO Rules of Professional Conduct related to communication, conflict of interest, fee splitting, referrals, and reciprocal discipline. If you have any questions about patents, trademarks, and practitioner professional responsibility, please contact me at [email protected] or visit my website at www.chiaraiplaw.com  The United States Patent and Trademark Office (“USPTO”) with the assistance of the Office of Enrollment and Discipline (“OED”) has been instituting changes in U.S. patent and trademark practice over the last five to ten years that are designed to improve the overall quality of the U.S. trademark system and reduce fraud and abuse. One change that went into effect in August of 2019 was the requirement that foreign trademark applicants at the USPTO must be represented by a licensed U.S. attorney. The rule change can be found here. This change applies to newly filed trademark applications as well as renewal fees, office actions and TTAB proceedings for trademarks filed before or after August of 2019. The rule change applies to trademark applicants whose domicile (legal residence for individuals or principal place of business for an entity) is outside of the United States. Technically, foreign domiciled applicants can still file their applications pro se, but they will not be able to respond to an Office Action or take any other necessary step to achieve registration without the designation of a U.S. attorney. Currently Madrid Protocol applicants with no substantive office action are exempt from the change, but it is anticipated that this exemption will eventually be removed. One of the driving forces behind this rule change has been the increase in fraudulent applications filed by foreign entities, either by the entity itself, or as been increasingly common by a non-U.S. licensed foreign agent/trademark filing company. The USPTO has been running into a massive number of improperly filed trademark applications due to violations of the signature requirements, improper statements of use, improper specimens, and other defects. One of the clear goals of the rule change was to improve the quality of U.S. applications (avoiding unintended mistakes), but a secondary (and possibly primary) goal was to reduce abuse of the U.S. trademark system (avoiding intentional abuse). The rule change may seem xenophobic at first glance, but what the USPTO and particularly the OED is focusing on is using U.S. licensed attorneys as gatekeepers to maintain trademark quality and ethical obligations. Because the USPTO and OED have the ability to sanction U.S. counsel, requiring their involvement in foreign applications and assisted U.S. applications provides a level of quality control backed by the ethical obligation of U.S. counsel. A U.S. domiciled individual or entity can still file and prosecute their own trademark application, however, if they are being represented by a third party before the USPTO that third party must be a licensed U.S. attorney. While it is not per se wrong to have “assistance” (not representation) with the mechanical filing of a patent application (see e.g., the many online non-attorney assisted filing services), many aspects related to trademark filing, and especially prosecution of a trademark application, fall under the “practice of law.” The USPTO (and the OED) have been wrestling with the definitions and rules by which domestic non-U.S. attorney assisted systems can operate with trademark filers. What is clear is that a non-U.S. attorney offering services that are the “practice of law” is in violation of the terms of service of the Trademark Electronic Application System (TEAS) and/or general trademark practice (as well as numerous state laws). Examples of actions that are very likely (to almost certainly) be considered the practice of law are: choosing the class of goods under which a trademark should be filed; drafting the goods and services; providing trademark clearance opinions; and responding (or providing advice) to office actions that raise substantive issues of law. In addition to the U.S. counsel requirements the USPTO has increased its activity in pursuing and challenging fraudulent activity. A January 2022 Federal Register Notice detailed processes by which the USPTO and OED can investigate and terminate suspicious trademark filings. Actions can now be instituted based on information from Examiners, data analytics on recent trademark filings, letters of protest from the general public (which can be submitted to [email protected]), media reports, and/or law enforcement. If the USPTO makes a determination that violations have occurred in the terms of use of the USPTO online system (TEAS) and/or the trademark rules of practice, the examination will be suspended and an order to show cause will be included in the online trademark file (Trademark Status and Document Retrieval “TSDR”). If the USPTO ultimately decides the activity warrants sanctions it can take necessary action, including termination of the application and/or cancellation of the registration. Following in the footsteps of the USPTO’s foreign domiciled applicants’ rule and the explicit notice of its investigative power, on January 25, 2022 the USPTO sanctioned three foreign companies that were acting as trademark agents for thousands of (mostly foreign) trademark applicants. Not only did the USPTO permanently deactivate the companies online USPTO accounts it took the draconian step of cancelling over five-thousand trademark applications filed by these companies. The final USPTO order (which can be found here) details a host of actions above and beyond filing improper documents. The trademark filing companies allegedly created errors in the filings and falsified office actions to increase fees and costs for the trademark applicants. While individual applicants effected by the ruling can petition for reinstatement, the default is cancellation. A common example of the abuse of trademark registrations is the improper filing of applications claiming use in commerce (that did not exist, often with a false specimen), and then using improperly obtained registration to harass and/or block legitimate trademark users. The Amazon Brand Registry has become ground zero for this type of abuse. Manipulation of the Amazon Brand Registry by fraudulent trademark registrations is adversely affecting legitimate brand users, leading to the inability to market products on Amazon, the need to institute cancellation proceeding, and/or Federal District Court litigation to recapture their trademark rights. With the exception of increased filing costs for some foreign applicants, the overall effect on the U.S. trademark system and U.S. consumers should be beneficial. Inherent in many of the above discussed rule changes has been the ease with which trademark applications can be filed online, which in turn has resulted in unscrupulous actors preying on foreign (and domestic) trademark filers. Additional abuses have resulted from intentional filings of applications with fraudulent statements of use to harass and/or blackmail legitimate trademark users. The actions by the USPTO (often through the OED) are attempting to remedy the abuses to foreign and domestic applicants and improve the overall quality of the U.S. trademark system. Enforcement actions against bad actors and gatekeeping by U.S. counsel will hopefully result in a better U.S. trademark system for all. One of the best ways to protect yourself and your mark from bad actors is to register your trademark with the USPTO. It is highly advisable to consult an experienced trademark attorney to discuss your individual needs and goals. If you have any questions about trademarks, clearance searches, opinion letters, and/or you would like to discuss protection and registration please contact me at [email protected] or visit my website at www.chiaraiplaw.com |
Should I Copyright the Trademark in My Patent?
AuthorNick Chiara is an IP attorney with over twenty years of patent and trademark experience. Archives
July 2022
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